Airbnb Finally Files For IPO After Profitable Q3

The hotel industry may be in one of its darkest periods ever, but the sector's chief disruptor says it is ready to test its worth on the public market.

Airbnb officially filed its S-1 prospectus for an initial public offering with the Securities and Exchange Commission on Monday, three months after it submitted confidential, preliminary forms indicating its intent. The home-sharing, short-term rental and vacation experience platform is expected to hit a public valuation of around $30B, The Wall Street Journal reports.

After private financing pushed Airbnb's valuation to $31B in 2017, that figure plummeted to $18B this spring, when the company applied for emergency loans during a period when 90% of its bookings were canceled, the WSJ reports. While the recent history of unicorn IPOs is littered with unprofitable companies missing their targeted valuations, Airbnb has recorded net profits in multiple quarters over the past three years, including this year's third quarter.

In the first nine months of 2020, Airbnb recorded net losses just shy of $700M, more than twice the amount it lost over the first nine months of 2019, the WSJ reports. Incoming revenue for the company dropped 32% over the same time period, with the worst damage — a nearly $600M net loss — coming in the second quarter, the first to be entirely under pandemic conditions.

Travel restrictions and fear hurt Airbnb's business much like it did for traditional hotels, but CEO Brian Chesky was able to pivot the company's focus as it cut costs to post a net profit of $219M, even with gross revenue down 18%. Marriott and Hilton both lost money in Q3, and average daily rates for traditional hotels in June sat at $92, while Airbnb's gross average rate was $145 in June, CoStar reports.

In April, Airbnb laid off about a quarter of its full-time workforce and 500 freelancers, slashed $800M from its marketing budget and pared back spending in areas outside of the most popular products it offers, CoStar reports.

During the coronavirus pandemic, that has been long-term rentals in more remote areas, especially for people looking to remain in the same metropolitan area as their permanent homes, the WSJ reports. Airbnb also raised $1B in debt and equity during Q2.

Although it has yet to record a fully profitable year, Airbnb still finds itself in a relatively advantageous position as it goes public, with a profitable Q3 boosting investor confidence and increasing the likelihood that it hits its target market capitalization, the WSJ reports. Ultimately, it likely benefited from delaying its IPO back in 2018.

Airbnb still has some baggage that may concern investors, mainly problems common to Silicon Valley startups that have sought ways around established industries, such as lack of oversight and regulatory battles. But its status and credibility as a brand name for its industry, like the Kleenex of home-sharing, allowed it to bring in new revenue from those looking for a pandemic escape without heavy marketing, CoStar reports. Airbnb reports 91% of its bookings in the first three quarters have come from direct or unpaid channels.